The Journal said American Funds and Edward Jones & Co. have gotten regulatory inquiries as a part of the SEC probe. American Funds, part of the privately owned Capital Group Cos. in Los Angeles, manages the tax-advantaged 529 plan for the state of Virginia, while brokerage house Edward Jones, of St. Louis , is a large 529 seller.
In the last few months, “we received an inquiry from the SEC, and I believe it was part of a routine industry inquiry into 529 plans,” John Boul, a spokesman for Edward Jones, told the Journal.
Meanwhile, Chuck Freadhoff, a spokesman for American Funds, confirmed that in the past year “we have had a lot of inquiries, including inquiries into the 529 plans as part of the wider information gathering.” The SEC is one of the regulators requesting data, Freadhoff added.
American Funds is the nation’s largest 529 manager, with about $7.76 billion in 529 assets as of the third quarter, according to Financial Research Corp. in Boston.
A 2004 SEC task force is poring over 529 plan fees and disclosures, according to the Journal. At the same time, the NASD is looking into whether brokers at 20 firms inappropriately pitched out-of-state 529 plans, instead of in-state plans with better tax benefits (See NASD Examining 529 Tax Disclosures ). The 529 plans now hold more than $45 billion in assets
Other investment firms that sell 529 plans but said they don’t comment on regulatory matters include American Express Co.’s financial advisers division; Morgan Stanley; Smith Barney, a division of Citigroup Inc.; Wachovia Corp.; UBS AG; and Merrill Lynch & Co, the Journal reported.
Sophie Launay, a spokeswoman for Fidelity Investments – the second-largest program manager of 529 plans by assets – said Fidelity has received “various requests” for information from regulators, but the firm doesn’t comment on specific issues.